In the early 1990s, consultant Arnold Danielson saw the future of banking - and the branches were empty.
After all, the industry was struggling to recover from heavy losses and failures, he said.
At the same time, it was embracing ATMs and banking by telephone and was plowing money into technology so customers could do their banking from their home computers.
Danielson, chairman of Danielson Associates, a Rockville bank consulting firm, told bankers that the industry "would have empty bank branches like empty gas stations."
However, like many other experts who proclaimed the death of the bank branch, or at least its decline, Danielson was wrong.
Instead of being swept aside by ATMs, computer banking and 1-800 "call centers," bank branches are growing in number in shopping malls, grocery stores and on busy street corners.
"I certainly thought we were going to go down in number and not up," said Danielson, who believes the industry has twice as many branches as it needs. Branch expansion "is crazy ... because deposit growth is almost nonexistent."
Yet the number of branches and main offices operated by commercial banks in Maryland climbed to 1,422 last year, up nearly 4 percent from five years ago, according to the most recent numbers by the Federal Deposit Insurance Corp. Nationally, the number of branch banks grew 7.5 percent over the same period, to 72,394.
Branches "are not going the way of the dodo bird," said Bert Ely, a banking consultant in Alexandria.
Peter Soraparu, executive director of programs at the Bank Administration Institute in Chicago, expects the number of branches to keep rising. "Branches are playing an increasingly important role in their [banks'] development strategies," he said.
Take Commerce Bancorp Inc. in Cherry Hill, N.J., which bills itself as "America's most convenient bank." It opened 30 branches last year and plans to open 171 more over the next 4 1/2 years.
Branches are important, said Gary N. Geisel, president and chief operating officer of Provident Bankshares Corp. in Baltimore, because they provide "convenience. ... Branch proximity still becomes the essential element."
They allow banks to sell customers different products under one roof, from car loans to mutual funds to insurance to credit cards.
Even discount brokerage giant Charles Schwab & Co. has taken a page out of the banking industry's book. It added 176 branches in the past five years for a total of 429. Although its customers make 80 percent of their trades online, more than 60 percent of new assets come through its brick-and-mortar network.
"We can't overemphasize face-to-face contact, that is critical," said Dan Hubbard, a spokesman at Charles Schwab, which is based in San Francisco. "The branch network has been an incredible part of our success."
Bankers have discovered that while some customers like using ATMs and home computers to conduct banking, the vast majority still prefer to do business in the bank branch.
More than 80 percent of Allfirst Financial Inc.'s customers, for instance, use a branch at least once a month, while small-business customers visit a branch four times a week, said Mary Ann Scully, executive vice president of community banking at Allfirst, which has 260 branches in Maryland, Virginia, Washington, Pennsylvania and Delaware.
"You still have to be high-tech and you have to be high touch," said Edwin Hale Sr., chairman of First Mariner Bancorp in Baltimore. "People want to be able to talk to someone who recognizes them when they walk in the door."
Another factor behind the growth in bank branches has been a boom in new bank charters since 1995 - something Danielson and other experts didn't count on.
The new banks are either buying branches that larger companies put up for sale or building their own to grab market share.
First Mariner, which is 6 years old, already has 25 branches, but regulators recently told it to slow its expansion and concentrate on building profit and capital.
Other banks are using branches to expand into new markets. Provident, which has 98 branches, operates 33 branches in the Washington suburbs of Maryland and Northern Virginia. The bank intends to open five more this year.
Branches in a new market are "critical to our success, ... critical to our visibility," Geisel said. "It would be very hard to build the traditional deposit business in a place like Northern Virginia without a rather extensive branch network. Even if I have these ATMs, generating new business is still a face-to-face encounter."
As the population moves and grows, the banks have followed with branches that can be erected quickly and cheaply because they are often smaller.
"You absolutely have to continue to build branches because our customers are moving, they are relocating businesses," Allfirst's Scully said. "If we are going to be convenient we need to be where the population centers are."
Ely said the lesson bankers have learned is that there is no single "magic way" to take care of all customers.
"Twenty years from now we are still going to have bank branches, we are going to have ATMs, we are going to have the Internet," Ely said.
